Norway’s Sovereign Wealth Fund Loses $71 Billion in Q1

Norway’s sovereign wealth fund’s investment portfolio lost 4.9% during the first quarter of 2022—equal to more than $71 billion—as its market value fell to $1.275 trillion, due to market volatility caused by political turmoil around the globe. [Source]

“The first quarter has been characterized by geopolitical turbulence, which has also affected the markets,” Norges Bank Investment Management Deputy CEO Trond Grande said in a statement. NBIM is the arm of the Norwegian central bank that operates the fund. “The return was negative for both equities and fixed income, but positive for unlisted real state.” [Source]

The fund’s equity investments declined 5.2% during the quarter, and its fixed-income investments provided no hedge, losing 4.8% for the period. Unlisted renewable energy infrastructure investments also weighed down the fund, dropping 3.3% during the first three months of the year. Unlisted real estate investments, the lone bright spot for the fund, gained 4.1% during the quarter; however, they only account for 2.7% of the portfolio.

The fund said the krone strengthened against several major currencies during the quarter, and that currency movements contributed to a 171 billion kroner decrease in the fund’s value, while inflow into the fund totaled 141 billion kroner. As of March 31, 70.9% of the fund was invested in equities, 26.3% in fixed income, 2.7% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure.

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Despite the rough quarter, the fund managed to beat its benchmark index’s return by 0.66 percentage points, or 82 billion kroner. The fund’s investments are measured against a benchmark index set by Norway’s Ministry of Finance on the basis of FTSE Group indices and Bloomberg Fixed Income indices.

The results for the quarter were a sharp U-turn from the previous quarter, when the fund returned 4.59%, as well as from the quarter a year ago when the fund returned 4.02%. As of the end of March, the fund had annualized returns of 8.41% over the past 10 years, and 6.33% since its inception at the beginning of 1998.

The fund giant owns equity stakes in more than 9,000 companies worldwide, and on average, holds approximately 1.3% of all listed companies in the world. Meanwhile, its fixed-income investments are allocated bonds issued by governments and related institutions and securities issued by companies. Up to 30% of the fund can be invested in fixed income.